Lulu Retail kicks off one of UAE's biggest IPOs this year

Lulu Retail Holdings, which runs one of the Middle East's biggest hypermarket chains, kicked off an initial public offering on Monday that bankers say could be the UAE's largest this year.

The offering by the conglomerate that runs more than 240 stores in the six countries belonging to the Gulf Co-operation Council comes during a retail spending boom in the region that is spurring domestic listings by companies in the sector.

The listing, set to run from Oct. 28 to Nov. 5, will offer more than 2.582 billion shares, which are expected to start trading on the Abu Dhabi Securities Exchange on Nov. 14, Lulu's IPO document showed.

Two sources involved in the transaction said the offering could raise between $1.7 billion-$1.8 billion for the 25% stake. Lulu declined to comment on the value of the deal.

Founded in 1974 by Indian businessman Yusuff Ali, Lulu joins other grocery firms that have listed, such as UAE-based Spinneys this year, and Saudi grocery retailer BinDawood Holding in 2020.

"We are confident that Lulu will continue to be where the world comes to shop," Chief Executive Saifee Rupawala was quoted in the IPO document as saying, as he pointed to a $100-billion market opportunity presented by GCC retail over the next five years.

The firm's business in Saudi Arabia was also primed for further growth, he said.

Many consumers in the Middle East have switched towards local and regional brands, with companies such as Alokozay coming up as an alternative to Coca Cola and Pepsi and some Western brands like Starbucks hit by grassroots boycott campaigns over Israel's offensive in the Gaza Strip.

In February, Saudi Arabia's Savola Group said it planned to list its grocery subsidiary Panda Retail, while the kingdom's wealth fund last year acquired a 30% stake in Tamimi Markets ahead of the supermarket chain's planned IPO.

In 2022, Reuters reported that Lulu was looking at an IPO and had hired investment bank Moelis & Co as an adviser.

Lulu said in the IPO document that it aimed to maintain a total dividend payout ratio of 75% of annual distributable profits after tax, and to make the payout twice a year, subject to relevant parameters.

Its first-half revenue of $3.9 billion this year was up 5.6% on the year, while full-year revenue in 2023 rose 5.6% to $7.3 billion.

The annual increase in revenue was primarily driven by sales growth from existing stores and further expansion of the group’s store network, as well as growth from its online channel.

Core earnings in the first half of 2024 stood at $391 million, up 4.3% on the year. Annual core earnings in 2023 rose 7.2% to $753 million.